Investing in Biotech companies
A lot of professional investors believe that investing in biotech companies contains a high level of risk because it is an unpredictable industry and no one knows which stock will perform well in the future. However, due to this risk, the risk/reward ratio
is also a bit more favorable. One of the best ways to make an investment in this industry is with biotech exchange-traded funds or ETF for short. These funds offer traders an opportunity to trade with a lot of biotech companies and it has a wide diversity of portfolios.
The biotech industry, according to the Nasdaq Biotechnology Index, had an overall income surge of 44% from 2020 to 2021. If we compare the S&P 500 indexes in the period from 2015 to 2020 and we will find that this Index had experienced an annual return which was worth 12.09%, on the other hand, the S&P Biotechnology Index had an average annual growth with just the value of 7.92%.
The Best Biotech ETFs
There are several companies that are worth mentioning while we talk about the best biotech ETFs to invest in. According to multiple sources such as Cathie Wood (CEO of Ark Invest), NASDAQ and Finance Yahoo some of the most important ETFs in this field include Crispr Therapeutics, Iovance Biotherapeutics, EXACT Sciences Corporation, Cellectis SA, and Twist Bioscience Corporation. We will try to conduct technical analysis
as well as fundamental analysis of each of them in a detailed way. So if you are interested in the biotech industry you need to find out more information about the five best biotech stocks ETF in the following paragraphs.
One of the most popular biotech stocks is Crispr therapeutics. Crispr is the leading gene-editing company according to 2021 statistics with several therapies targeting Immuno oncology as well as regenerative medicine and rare diseases. Basically, CRISPR could produce a lot of medicine by editing patients’ genes as a therapy rather than treating it forever. So they have huge potential not just for the specific therapies the company is working on but just the use of that technology and its wider applications.
It should be noted that this biotech ETF stock has ten therapies in the pipeline five of which are in clinical trials already so there is a great chance that they are a couple of years from approval. Besides, in terms of statistics, a noticeable feature of the company is that it has no debt and has almost 1.4 billion dollars in the balance sheet cash which is well above its short-term funding needs.
According to April 2021 statistics, the price of one Crispr Therapeutics share is $115.82. The market capitalization of the company equaled $8.7 billion dollars.
On top of that, Crispr Therapeutics spends about 230 million dollars a year in research and development expenses. Besides, the average analyst estimate is 136 dollars a share which is a bit lower than the 2021 price but almost all biotech stocks are selling off at this period of time.
A lot of professional investors suggest buying in half Crispr Therapeutics stocks and waiting a few months to invest the rest of the money when there will be a better buying price of the share. After that, holding the stock for 3 to 5 years.
The next company on the list of biotech stocks includes Iovance Biotherapeutics. This company is focused on Immuno oncology which is one of the highest margin segments in the biotech industry. Iovance biotherapeutics announced in August 2020 that it had completed enrollment in its cervical cancer study. It also reported data on three other programs including its melanoma program.
Iovance is constructing a cell therapy and expects commercial manufacturing to start in 2022. This fact means that they could earn more in 2022.
While we talk about the specific statistical numbers it should be noted that the company has 772 million dollars in balance sheet cash and no debt at all. Besides, Iovance biotherapeutics has about $212 million in annual research and development expenses. On top of that, the company has approximately 56 million dollars in other operating costs.
According to the 2021 statistics, the market capitalization of the company is 4.5 billion dollars. Besides, the average estimate of the overall revenue by the end of 2021 is only 3 million dollars; this estimate is much higher by the end of 2022 with 86 million dollars.
All this information indicates that Iovance Biotherapeutics has huge growth potential in the future so if you are interested in the biotech industry investing in this biotech company stock might be the best possible option.
EXACT Sciences Corporation
Another company worth mentioning in this article is EXACT Sciences Corporation which is in the diagnostic space screening for cancers through DNA and protein-based tests that can detect multiple types of cancer in just one test. The company is partnered with the Mayo Clinic and Johns Hopkins University. The estimate of the total market cap is over 25 billion dollars.
Besides, the company has booked three years of sales growth and reported a year-over-year increase in the third quarter of 2021. However, the financial position of the company is a little weaker compared to the mentioned numbers.
The Exact Sciences Corporation has over 806 million dollars in balance sheet cash. It should also be noted that the company, compared to the other best biotech stocks, has 85 million in debt but spends roughly 1.6 billion dollars a year in its overall operating costs.
The company’s financial conditions are not very steady and strong, however EXACT sciences’ revenue is growing so fast that a lot of professional investors believe that this one will definitely show positive earnings during 2022.
On top of that, another beneficial aspect of this company is that EXACT sciences is one of the few biotech stocks that have not zoomed past analyst price targets. Their shares were up to 38% in 2020. Also, an average analyst estimate is 157 dollars a share which is 20% up compared to the 2021 statistics. So according to this information, the EXACT Sciences Corporation has a huge potential in the future in terms of revenue growth, so if you are looking for a long-term investment in the biotech industry, this is one of the best biotech company stocks in this sector.
While talking about biotech companies another stock that should also be mentioned is Cellectis SA which is a gene-editing company. Its focus is on Immunotherapies for cancer. Even though this one is not as far advanced in terms of therapies as Crispr Therapeutics. This company is targeting different needs so its researches and developments are equally important in the industry.
Besides, it is important to know that Cellectis has six therapies in the pipeline with key developments during 2022-2025. In just two target therapies with its Allergan partnership, the company could book up to 2.8 billion dollars in development and sales milestones which is huge for the company that booked 15 million dollars in total in 2019 sales.
While explaining Cellectis SA, one of the best biotech stocks, it should also be stated that the company has increased revenue by 20% over the year of 2020 and has a strong balance sheet. The balance sheet cash of 360 million dollars is more than enough in order to cover the 126 million dollar annual operational costs including 94% of research and development expenses.
The essential thing is that the company has no debt, however, it has 46 million dollars in capital lease obligations. Though, we can freely say that Cellectis SA holds a very good financial position according to the 2021 statistics. Its shares were up 68% in 2020.
Besides, the average analyst target is 29 dollars per share. However, this company will definitely grow in the future in terms of returns and could have a solid double-digit payout percentage. This is why Cellectis SA is indeed the biotech company that is worth investing in.
Twist Bioscience Corporation
The last company on the biotech ETF list is Twist Bioscience Corporation which manufactures synthetic DNA and DNA products. Their shares were up 750% and reached their peak in 2020. The company's synthetic silicon-based DNA technology is completely disruptive.
Twist Bioscience Corporation’s revenue grew by 67% by the end of 2020 to 90 million dollars after doubling it in 2019. Besides, another noticeable feature is that the company has over 290 million dollars in the balance sheet cash. That's more than enough to cover annual operating expenses which is around 146 million dollars as well as 26 million dollars in debt and lease obligations.
The average analyst estimates that 112 dollars per share is still a little below the price level for April 2021. Therefore, professional investors suggest watching Twist Bioscience Corporation stock and waiting until it gets a better price. According to all this information, this company indeed has a solid future in the biotechnology industry and is going to experience huge growth in terms of revenues as well as earnings. So while you are searching for the right ETF biotech stocks, this one is probably one of the best among all the options in the biotech sector.
Final thoughts on the best biotech ETFs
In this article, we have analyzed that according to the advancements in science and technology in the 21st century, Biotech ETFs have a huge potential for growth in the future. Biotech ETF-s usually have aggressive growth because this market is very volatile and these types of companies have a high risk-and-return profile.
The fact that the biotech industry is a huge one can be proved by saying that according to the Nasdaq Biotechnology Index, this sector had an overall income that was worth 44.0% from 2020 to 2021. Besides, the private funding for tech sciences companies hit 16.5 billion dollars in the first half of 2020 alone.
On top of that, the essential thing about biotech ETF stock is that it usually moves from 10 or 15% or even more in a single day. Therefore, while investing in these types of stocks, traders need to create a portfolio perspective that will include from 7 to 10 stocks and trade with them for 3 to 5 years in order to generate a substantial amount of profits.
We have already analyzed that the five most important ETFs in this field include Crispr Therapeutics, Iovance Biotherapeutics, EXACT Sciences Corporation, Cellectis SA, and Twist Bioscience Corporation. The statistics show that they have a huge growth potential in the future so if you are interested in the biotech industry investing in these ETFs might be the best possible option for you.